Last year was the worst on record for Palestinians in nearly three decades as the Covid-19 pandemic compounded the effects of Israeli occupation, according to the United Nations Conference on Trade and Development.
A slow or inadequate recovery in 2021 will heighten the risk of bankruptcy for small and medium-sized enterprises brought to the brink by the pandemic, Unctad said in its latest report on Tuesday.
“Economic recovery in 2021 and beyond hinges on actions that will be taken (or not) by the occupying power and the scale of donor support,” the UN agency said. "Despite the severity of the pandemic shock, occupation remains the major impediment to development in the Occupied Palestinian Territory."
The Palestinian economy shrank by 11.5 per cent in 2020, the second largest contraction since the establishment of the Palestinian National Authority in 1994, from growth of 1.4 per cent in 2019, according to Unctad data.
As economic activity ground to a halt last year, more than 66,000 employees lost their jobs and unemployment rose to 26 per cent. The labour force participation rate declined to 41 per cent in 2020, from 44 per cent in 2019. The crisis engulfed all sectors of the economy, including tourism, construction, services, industrial and agricultural sectors.
Palestine recorded 398,946 Covid-19 cases and 4,046 deaths as of Tuesday, according to Worldometer, which tracks Covid-19 data worldwide. Some 367,181 people recovered.
"Until occupation is ended, there is no substitute for adequate support from donors and the international community for rebuilding the shattered physical and institutional infrastructure and the fragile health care system," Unctad said.
The PNA is saddled with responsibilities much bigger than the resources and policy-making capacity at its disposal, the UN agency said. Moreover, the economic impact of the recent air strikes on the Gaza Strip in May and confrontations in the rest of the Occupied Palestinian Territory is expected to be enormous and should be accounted for in future UN reports, it said.
"For international support to translate into genuine progress, all of the restrictions imposed by the occupying power on the Occupied Palestinian Territory should be lifted," Unctad said.
The Covid-19 pandemic has taken its toll on an already battered economy.
Just over a month into the pandemic, the Palestinian economy contracted 4.9 per cent in the first quarter of 2020, compared to the previous quarter, Unctad said.
The second quarter was the worst, as all key economic indicators nosedived. GDP shrank 18 per cent, two thirds of establishments completely shut down, unemployment soared to 39 per cent, while investment, export and imports fell significantly, according to the UN agency.
"Even before the onset of the Covid-19 shock, the Palestinian economy was in disarray and the overall politico-economic environment had been deteriorating in recent years," Unctad said. "Loss of land and natural resources to settlements continued unabated, fiscal resources were leaking continuously to the Israeli treasury and the regional economy of Gaza has been affected by a prolonged blockade and recurring military operations."
The eruption of violence in response to Israeli authorities’ threat to evict Palestinian families from their homes in East Jerusalem in April 2021 was another setback for the Palestinian economy.
For Gaza, which has been under an Israeli blockade since 2007, the pandemic made life worse for people whose mobility was already restricted.
In May 2021, Israeli air strikes destroyed and damaged valuable assets, including numerous hospitals and primary health care centres, commercial and residential buildings, and educational facilities.
"The pandemic hit at a particularly difficult time of disintegrating hygiene and public healthcare infrastructure, deep poverty, insecurity and recurring military confrontations," Unctad said.
"Despite the pandemic-induced slowdown in human activity in the region and around the world, 2020 registered the highest number of demolitions and displacement of Palestinians in recent years."
Despite UN Security Council resolution 2334 that bans the creation of settlements, Israel approved or advanced more than 12,150 homes in settlements in 2020, the highest since 2012, Unctad said.
In 2021, Israel created more than 280 settlements in the West Bank, including East Jerusalem. The settler population grew to more than 650,000 in early 2021 from 198,315 in 2000.
"Settlements dispossess the Palestinian people of their land, natural resources as well as their inalienable right to development, entrench occupation and pre-empt a meaningful sustainable two-state solution," the Unctad report warned.
In addition, the environmental impact of settlements is serious, it said. Israel transfers large quantities of hazardous materials and e-waste every year for processing in the West Bank, where its own regulations and monitoring are less stringent than those applied within its borders.
"Pollution from the informal e-waste sector and unregulated industries is already affecting human health, particularly the health of children," the Unctad said. "Occupation further undermined the environment by the destruction of millions of olive and other trees to make room for settlement growth."